Question

    In the context of recent news (2025), the term 'Sticky

    Inflation' often refers to:
    A Rapidly falling inflation. Correct Answer Incorrect Answer
    B Inflation that is slow to decline, particularly in services and core components. Correct Answer Incorrect Answer
    C Hyperinflation. Correct Answer Incorrect Answer
    D Deflationary trends. Correct Answer Incorrect Answer
    E Inflation caused by supply chain disruptions. Correct Answer Incorrect Answer

    Solution

    • After the high inflation of 2022-23, central banks globally raised interest rates aggressively. While headline inflation (which includes volatile food and energy) has fallen,  core inflation  (which excludes these volatile items) and  services inflation  have proven to be  "sticky"  -- meaning they are declining at a much slower pace. This stickiness is often attributed to factors like strong wage growth in tight labor markets, resilient consumer demand for services, and businesses passing on higher costs. This phenomenon has been a key factor in central banks' (like the US Fed and RBI) cautious approach to cutting interest rates in 2024-25.

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